Florida Agency for Health Care Administration · Florida Agency for Health Care Administration DRG...

Florida Agency for Health Care

Administration

DRG Payment Implementation

Fourth DRG Public Meeting

November 15, 2012

Presentation by MGT of America, Inc. and

Navigant Consulting, Inc.

Meeting Agenda

Agenda

Results of Simulations 3 – 7

Detailed Results of Simulation 5

Preliminary Policy Decisions

Documentation and Coding Adjustment

DRG Calculator

Next Steps


Characteristics in Common

Simulations 3 – 7 all have the following characteristics:

• Separate provider policy adjustors as follows:

o Rural hospitals - set to 85% of cost

o LTACs - set to 60% of cost

o Rehab hospitals - set to 60% of cost

• IGT payments are casemix adjusted by provider

• A low-side outlier policy is in place and is symmetrical with the high

side outlier

• Outlier threshold is $27,425 (only exception is simulation 6)

• Outlier marginal cost percentage is 80% (only exception is

simulation 7)


Unique Characteristics and Results

Simul

Nbr

Description

Base Rate

Obstetric

Pay-to-Cost

Children’s

Pay-to-Cost

Outlier

Percentage

3 • No additional adjustors $3,263.99 82% 78% 8.6%

4 • Adjustor for OB = 1.15 $3,183.05 87% 77% 8.7%

5

• Adjustor for OB = 1.15

• Adjustor for high Medicaid

and high outlier = 1.5

$3,131.73 86% 86% 8.5%

6




• Outlier threshold = $35,000

$3,218.89 87% 85% 7.2%

7




• Outlier threshold = $27,425

• Marginal cost % = 70%

$3,212.02 87% 84% 7.4%


Casemix Adjusting Payments of IGT Funds - Example

» Example provider receiving $5M from IGT funds during the year

» Example provider’s overall casemix is 0.6

» Example provider has 2,500 stays in a year

» Average per discharge IGT add-on payment equals,

$5M / 2,500 = $2,000

» For a claim with casemix equal to 0.75,

Per-claim IGT Pymt = $2,000 * (0.75 / 0.6)

= $2,500

» Separate claim with casemix equal to 0.3,

Per-claim IGT Pymt = $2,000 * (0.3 / 0.6)

= $1,000


Calculation of Budget Goals by Provider Category

A B C D E F G H

Provider

Classification Stays

Baseline Payment

From GR and

PMATF

Baseline Payment

From Automatic

IGTs

Baseline

Payment From

Self-Funded

IGTs Estimated Cost

Percentage

of Cost

Goal

Total Budget

Goal with IGTs

DRG

Reimbursement

from GR and

PMATF

1 Rural 11,143 45,608,998$ -$ -$ 53,768,677$ 85% 45,703,375$ 45,703,375$

2 LTAC 86 1,510,651$ 42,706$ 87,713$ 2,979,177$ 60% 1,787,506$ 1,657,088$

3 Rehab 525 4,184,588$ -$ -$ 8,381,138$ 60% 5,028,683$ 5,028,683$

4 All Other 406,281 1,528,622,979$ 1,008,803,087$ 216,132,801$ 3,323,561,798$ 1,527,538,070$

5

6 Totals: 418,035 1,579,927,216$ 1,008,845,793$ 216,220,514$

7

8 Overall Total Historical Baseline Payment: 2,804,993,523$

Notes:

1) For rural, LTAC and rehab hospitals, DRG reimbursement from general revenue and provider assessment (PMATF) equals 95% of estimated cost minus any per-

claim payments being made via IGTs. For example, H1 = [G1 - (D1 + E1)].

2) For "All Other" hospitals, DRG reimbursement from general revenue and provider assessment (PMATF) equals the total historical allowed amount from GR and

assessment minus the total planned DRG reimbursement from GR and assessment for rural, LTAC and rehab hospitals.

H4 = [C6 - (H1 + H2 + H3)].


Simulation 5 Parameters

Simulation Parameters Value - Overall

Value - All

Other Hospitals

Value - Rural

Hospitals

Value - LTAC

Hospitals

Value - Rehab

Hospitals

Baseline payment, total $2,804,993,523 $2,753,558,867 $45,608,998 $1,641,069 $4,184,588

Baseline payment, general revenue and PMATF $1,579,927,216 $1,528,622,979 $45,608,998 $1,510,651 $4,184,588

Baseline payment, automatic IGTs $1,008,845,793 $1,008,803,087 $0 $42,706 $0

Baseline payment, self-funded IGTs $216,220,514 $216,132,801 $0 $87,713 $0

Simulation payment goal $2,804,993,523 $2,752,473,958 $45,703,375 $1,787,506 $5,028,683

Simulation payment, result $2,805,003,064 $2,752,473,806 $45,713,283 $1,787,609 $5,028,366

Difference $9,541 -$153 $9,908 $103 -$317

Simulation payment, general revenue and PMATF $1,579,936,757 $1,527,537,918 $45,713,283 $1,657,191 $5,028,366

Simulation payment,automatic IGTs $1,008,845,793 $1,008,803,087 $0 $42,706 $0

Simulation payment, self-funded IGTs $216,220,514 $216,132,801 $0 $87,713 $0

DRG base price $3,131.73 $3,131.73 $3,131.73 $3,131.73 $3,131.73

Cost outlier pool (percentage of total payments) 8.5% 9% 2% 27% 8%

n/a None 2.049 1.651 1.808

Policy adjustor - DRG (serv ice)

Policy adjustor - Age

Documentation & coding adjustment

Relative weights

Transfer discharge statuses

High side (prov ider loss) threshold and marginal

cost (MC) percentage

Low side (prov ider gain) threshold and marginal

cost (MC) percentage

Charge Cap

DRG Payment Simulation 5

Notes:

1) Values are for purposes of illustration only and do not represent Navigant recommendations or AHCA decisions.

APR v.29 national re-centered to 1.0 for FL Medicaid

02, 05, 65, 66

$27,425

80%

$27,425

80%

None

None

Obstetrics - 1.15

None

Policy adjustor - Prov iderHigh Medicaid utilization and high outlier payments: 1.5


Summary by Service Line - Total

Service Line Stays

Casemix

Recentered Estimated Cost

Baseline

Payment

Simulated

Payment Change

Percent

Change

Baseline

Pay / Cost

Simulated

Pay / Cost

Simulated

Outlier

Payment

Sim Outlier

% of Pymt

Misc Adult 72,754 1.72 1,071,944,851$ 723,992,936$ 828,777,934$ 104,784,998$ 14% 68% 77% 86,285,649$ 10%

Obstetrics 111,700 0.56 475,669,361$ 447,707,479$ 409,155,204$ (38,552,276)$ -9% 94% 86% 3,047,250$ 1%

Neonate 11,697 4.11 386,225,878$ 445,320,739$ 357,826,920$ (87,493,819)$ -20% 115% 93% 46,746,945$ 13%

Pediatric 46,382 1.09 422,498,126$ 382,767,281$ 391,732,645$ 8,965,364$ 2% 91% 93% 51,090,175$ 13%

Gastroent Adult 27,907 1.36 324,529,009$ 218,095,098$ 235,222,901$ 17,127,803$ 8% 67% 72% 15,594,553$ 7%

Circulatory Adult 24,526 1.67 330,678,559$ 170,504,828$ 254,576,463$ 84,071,636$ 49% 52% 77% 17,826,447$ 7%

Resp Adult 18,090 1.32 204,090,653$ 156,683,845$ 147,798,610$ (8,885,235)$ -6% 77% 72% 11,278,459$ 8%

Normal newborn 90,615 0.16 82,164,916$ 110,303,520$ 90,835,112$ (19,468,408)$ -18% 134% 111% 1,304,723$ 1%

Mental Health 12,443 0.70 44,533,912$ 100,644,313$ 51,887,446$ (48,756,867)$ -48% 226% 117% 376,686$ 1%

Rehab 1,789 1.79 27,626,106$ 39,040,081$ 20,668,813$ (18,371,268)$ -47% 141% 75% 1,076,288$ 5%

Transplant Pediatric 51 16.20 11,811,193$ 6,245,353$ 10,439,842$ 4,194,489$ 67% 53% 88% 4,069,548$ 39%

Transplant Adult 81 11.29 6,918,226$ 3,688,051$ 6,081,175$ 2,393,124$ 65% 53% 88% 803,937$ 13%

Total 418,035 1.00 3,388,690,790$ 2,804,993,523$ 2,805,003,064$ 9,541$ 0% 83% 83% 239,500,661$ 9%

Simulation 5

Summary of Simulation by Service Line

Notes:

2) Estimated cost determined using AHCA cost-to-charge ratios from SFY 2010/2011.

1) "Transplant" includes only those cases paid per diem, not through the global period.


Pay-to-Cost by Service Line - Total


Change in Payment by Service Line


Summary by Provider Category


Pay-to-Cost by Provider Category


Change in Payment by Provider Category


Pay-to-Cost Comparison – IGT vs. non-IGT Providers


Provider Impact – All Hospitals


Provider Impact – Hospitals with > 5% Medicaid


Provider Impact – Hospitals with > 11% Medicaid

Preliminary Design Decisions

Preliminary Design Decisions

Design Consideration Preliminary Decision

DRG Grouper • APR-DRGs (version 30, released 10/1/2012)

DRG Relative Weights • National weights re-centered to 1.0 for Florida

Medicaid

Hospital Base Rates

• One standardized amounts

• Adjust standardized base rate using Medicare

wage indices

• Base rates used to distribute funds from general

revenue and Public Medical Assistance Trust Fund

Per-Claim Add-On Payments

• Used to distribute the IGT funds paid on a per-claim

basis today

• Two add-ons per claim, one for automatic IGTs

another for self-funded IGTs

Preliminary Recommendations


Targeted Policy Adjustors

• Service adjustor for obstetrics

• Provider adjustors for:

o Rural hospitals

o Free-standing LTAC hospitals

o Free-standing rehab hospitals

o High Medicaid and high outlier hospitals

Outlier Payment Policy • Adopt “Medicare-like” stop-loss model

• Include a single threshold amount

• Leaning towards no provider gain outlier policy

Transfer Payment Policy

• Adopt “Medicare-like” model for acute transfers

• Discharge statuses applicable to acute transfer

policy = 02, 05, 65, 66

• Do not include a post-acute transfer policy



Charge Cap • Leaning towards including a charge cap instead

of a hospital gain outlier adjustment

Interim Claims • Do not allow

Adjustment for Expected Coding

and Documentation Improvements • Necessary

• Further discussions needed to define details

Transition Period • None

Non-Covered Days o 45 Day Benefit Limit

o Undocumented non-citizens

• Prorate payment based on number of covered

days versus total length of stay


Design Consideration Preliminary Recommendation

Partial Eligibility • Prorate payment based on number of eligible

days versus total length of stay

Prior Authorizations

• Remove length of stay limitations for admissions

that will be reimbursed under the DRG method

• Only exception will be recipients who have

reached 45 day benefit limit and recipients who

are undocumented non-citizens

Payment for Specialty Services

(Psychiatric, Rehabilitation,

Other)

• Psychiatric, rehabilitation, and long term acute

care stays reimbursed through DRG payment

method

• Stays at state psychiatric facilities excluded from

DRG payment

• Transplants currently paid via global fee excluded

from DRG payment

• Newborn hearing test paid in addition to DRG

payment

Documentation and Coding

Adjustment


Justification

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Illustration of Potential Impacts to Paid Casemix from Coding and Documentation

Improvement

Pai

d C

asem

ix

Higher

Lower

Bump from DCI Rate of Paid Casemix Increases Return to Pre-Implementation

Levels System Implementation

Rate of Increase Without APR-DRG

Implementation

Why does the DCI bump occur?

• Coding and documentation improvements are a necessary and

appropriate response by providers to the requirements under the

APR-DRG model.

• Because the same level of coding rigor was not required for

payment purposes under the legacy per diem model, we assume

that case mix in our simulation models is understated.

• We expect that case mix will increase in future periods, beyond

actual increases in patient acuity.


Justification


Example of Importance of Coding with APR-DRGs

Patient Record Version 1 Coding Version 2 Coding

DX 1 – V3000 – Live newborn Include Include

DX 2 – 745.4 – Ventricle septal defect Include Include

DX 3 – V290 – Observation Exclude Include

DX 4 – 745.5 – Ostium secoundum type arial septal defect Exclude Include

DX 5 – 774.6 – Unspecified fetal and neonatal jaundice Exclude Include

Same legacy Medicaid per diem and MS-DRG assignment - 389, Full Term Neonate w/Major Problems

Different APR-DRG Assignments – 640 - Neonate Birthwt > 2499G,

Normal Newborn or Neonate w Other Problem

SOI = 2

RW = .1871

SOI = 3

RW = .4847

Coding requirements are significantly different for APR-DRGs, even when

compared to the requirements under the current Medicare MS-DRG model.


Corridor Approach with Prospective Rate Adjustment

1.000 1.010 1.020 1.030 1.040 1.050

0.03 0.03

0.03

0.950

1.000

1.050

1.100

10/11 11/12 12/13 13/14 14/15 15/16

3% Corridor

Expected CMI

1.08

Proposed Adjustment Parameters

1. State adjusts rates downward for SFY13/14 to reflect 3% reduction in Relative Weights/Casemix.

2. Analyze CMI after first year under APR-DRGs. If actual CMI in SFY 13/14 is less than “expected”, State adjusts rates upward

in following year to compensate for 3% reduction.

3. If actual CMI in SFY 13/14 is greater than “expected”, but falls within the “corridor”, State adjusts rates upward in the following

year to compensate for amount of 3% reduction not used up by casemix increases.

4. If actual CMI in SFY 13/14 is greater than combined “expected” and “corridor”, State adjusts rates in the following year

downward to compensate for additional cost to the state resulting from casemix increases.

5. State will make similar adjustments for SFY 14/15, 15/16 and subsequent years, if necessary.

Agg

rega

te C

MI 1.07

1.06

DRG Calculator

DRG Calculator

2

3

4

5 Information Data Comments or Formula

6 INFORMATION FROM THE HOSPITAL

7 Submitted charges $50,000.00 UB-04 Field Locator 47 minus FL 48

8 Length of stay 31 Used for transfer pricing and covered days adjustments

9 Medicaid covered days 31 Used for covered days adjustment

10 Patient discharge status = 02, 05, 65 or 66? (transfer) No Used for transfer pricing adjustment

11 Patient age (in years) 25 Used for age adjustor

12 Other health coverage $0.00 UB-04 Field Locator 54 for payments by third parties

13 Patient share of cost $0.00 Includes spend-down or copayment

14 Hospital-specific cost-to-charge ratio 35.00% Used to estimate the hospital's cost of this stay

15 Hospital average per discharge automatic IGT add on pymt $0.00

16 Hospital average per discharge self-funded IGT add on pymt $0.00

17 Hospital casemix 0.75 Hospital's annual average FL Medicaid APR-DRG relative weight

18 Hospital category All Other From drop down list - used to determine provider policy adjustor

19 Wage index 0.9062

20 APR-DRG 089-4 From separate APR-DRG grouping software

21 APR-DRG INFORMATION

22 APR-DRG descriptionMAJOR CRANIAL/FACIAL

BONE PROCEDURESLook up from DRG table

23 Casemix relative weight--re-centered for FL Medicaid 10.0754 Look up from DRG table

24 Service adjustor 1.00 Look up from DRG table

25 Age adjustor 1.00 Look up from DRG table

26 Average length of stay for this APR-DRG 20.75 Look up from DRG table

27 HOSPITAL INFORMATION

28 Provider adjustor 1.000 Look up from provider adjustor table

29 Labor portion 0.620 IF E19 < 1 then 0.62 else 0.688

30 Provider base rate $2,825.53 =(E32*E29*E19)+(E32*(1-E29))

31 PAYMENT POLICY PARAMETERS SET BY MEDICAID

32 DRG base price $3,000 Used for DRG base payment

33 Cost outlier threshold $27,425 Used for cost outlier adjustments

34 Marginal cost percentage 80% Used for cost outlier adjustments

35 Casemix adjustment factor 1.00 Used to adjust DRG relative weights should a need arise, else leave set to 1.00.

36 Age cut-off for age policy adjustor 18

37 DRG BASE PAYMENT

38 Pre Transfer DRG base payment $58,629.79 =IF E11 < E36 Then E30*E26*E24*E25*E28*E35 Else E30*E26*E24*E28*E35

39 TRANSFER PAYMENT ADJUSTMENT

40 Is a transfer adjustment potentially applicable? No Look up E10

41 Per diem payment amount N/A IF E40="Yes", then (E38 / E26) * (E9 + 1) rounded to 2 places, else "N/A"

42 Is per diem payment amount < full stay base payment? N/A IF E40 ="Yes" then [if (E41 < E38), then "Yes" else "No"] Else "N/A"

43 Full stay DRG base payment $58,629.79 IF E42 = "Yes" Then E41 Else E38

44 FULL STAY ADD-ON IGT PAYMENTS

45 IGT casemix adjustor 27.67 E26 / E17

46 Full stay automatic IGT add-on payment $0.00 E15 * E45

47 Full stay self-funded IGT add-on payment $0.00 E16 * E45

48 Pre outlier payment amount $58,629.79 E43 + E46 + E47

49 COST OUTLIER

50 Estimated cost of the stay $17,500.00 E7 * E14

51 Does this claim require an outlier payment? No IF (E50-E48) > E33 Then "Yes" Else "No"

52 Estimated loss on this case N/A IF E51 = "Yes" Then E50 - E48 Else "N/A"

53 DRG cost outlier payment increase $0.00 IF E51 = "Yes" (E52 - E33) * E34 rounded to 2 places, Else 0

54 NON-COVERED DAYS PAYMENT ADJUSTMENT

55 Are covered days less than length of stay No IF E9 < E8 Then "Yes" Else "No"

56 Non-covered day reduction factor 1.0000 IF E55 = "Yes" Then E9 / E8 rounded to 4 places Else 1.0

57 Adjusted DRG base payment $58,629.79 E43 * E56

58 Adjusted outlier payment $0.00 E53 * E56

59 Adjusted automatic IGT add-on payment $0.00 E46 * E56

60 Adjusted self-funded IGT add-on payment $0.00 E47 * E56

61 Pre-charge cap allowed amount $58,629.79 E57 + E58 + E59 + E60

62 CHARGE CAP

63 Does the charge cap apply? Yes IF E61 > E7 Then "Yes" Else "No"

64 Charge cap reduction factor 0.8528 IF E63 = "Yes" Then E7 / E61 Else 1.0

65 Final DRG base payment $50,000.00 E57 * E64

66 Final outlier payment $0.00 E58 * E64

67 Final DRG payment $50,000.00 E65 + E66

68 Final automatic IGT add-on payment $0.00 E59 * E64

69 Final self funded IGT add-on payment $0.00 E60 * E64

70 CALCULATION OF ALLOWED AMOUNT AND REIMBURSEMENT AMOUNT

71 Allowed amount $50,000.00 E67 + E68 + E69

72 Other health coverage $0.00 E12

73 Patient share of cost $0.00 E13

74 Payment amount $50,000.00 IF (E71-E72-E73) > 0, then E71-E72-E73, else 0

75 11/12/2012

Florida Medicaid DRG Pricing CalculatorNote: This calculator has not been approved and is subject to change before implementation of payment by DRG. Specific policy values are for purposes of illustration

only.

CALCULATOR VALUES ARE FOR PURPOSES OF ILLUSTRATION ONLY.

Indicates payment policy parameters set by MedicaidIndicates data to be input by the user

Will be available

shortly on AHCA

website.

Next Steps

• Convert to version 30 APR-DRGs

• Change from provider gain outlier to charge cap

• Add proration for non-covered days

• Finalize policy decisions

Next Steps

Finalize Simulation with SFY 2010/2011 Data

• Apply rate changes and IGT funding level changes (either

those from SFY 12/13 or those predicted for 13/14)

• Make adjustments based on real casemix increase and

predicted casemix increase from documentation and

coding improvements

• Apply inflation factor to charges from SFY 10/11 to 13/14

(used in calculation of estimated cost)

• Apply most current AHCA cost-to-charge ratios

• Apply FFY 2013 Medicare wage indices

Next Steps

Adjust Simulation Dataset to Model 2013/2014

Questions and Discussion

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